Earnings Call: Q2 2021

Aug 12, 2021

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the LANXESS conference call. I would now like to turn the conference over to Andre Simon, Head of Investor Relations. Please go ahead. Yes. Thank you very much, And a warm welcome to everybody on the phone to our Q2 conference call from my end here in Cologne. As always, I have with me our CEO, Matthias Zahard and our CFO, Michael Pontzen. Please take notice of our Safe Harbor statements. And with that, I'm happy to hand over to Matthias for a brief presentation and afterwards, as always, the Q and A. Matthias, please go ahead. Thank you so much and welcome from my side. I will jump into the presentation directly Page 4 and Brief comments on the key highlights for Q2. All in all, we see that volumes are back on pre COVID levels. Earlier than expected. Clearly, I have to change my view here compared to where we saw the markets begin of the year, so this is positive. We see a strong recovery in the divisions that were heavily impacted in Q2 last year. So especially as far as additives is concerned and Engineering Materials profitability are clearly strongly rising because They had seen sharp drops last year. As far as EBITDA is concerned, we are nearly back to 2019 levels with 277, this is of around about 24%. It could have been more had shipping not been a constraint to us in Especially as far as cross ocean shipments were concerned, but say, this is something that is going to normalize in the like to thank you for joining the LANXESS conference call. Even though for the second half of the year, shipments will still be a rare good. As far as M and A is concerned, we were active on both sides of the M and A markets. 1 on the divestment side, we closed the organic letter transactions in Q2 and collect the proceeds. As far as Emerald is concerned, we went out last week on 3rd August, closed the transaction and I welcomed Immediately, our new LANXESS team members, around about 500 chemical experts, I had a town hall with all of them globally and on Friday last week, I had a 1 hour session with the newly formed management team, all Clear chemical experts, pros and positive vibrations. I felt good afterwards. And I hope they felt even stronger as well. Focusing on organic investments, we opened up like to turn the call over to R and D Development Center, APAC, in the Shanghai area, so called Skip All in all, I think it was an active second quarter with sound financials or improving financials and Sound moves on the strategic side. Page 5, let's move there. We give the cornerstones financially On the Emerald transaction, this is how 2020 was. Just a heads up for you guys in order to update your model This is a business truly specialty, very nice fits with the products in our consumer in the 3 years to come to something like 22%, 25%. This is at least What is embedded in our business plan, so we consider here the business to develop nicely, but of course, it will be work That has to be done. Moving now to Page number 6 shows you how we integrate the business in our portfolio. So basically, as far as the consumer facilities are concerned, the preservatives, animal health products, Flavors and Fragrances. We bundle this business also with the ingredients That we have an intermediates for flavor and fragments, so that will be bundled together. And we will form On the basis of this, I would say, the leading player worldwide on Benz products with a chemistry of Tolerination, Tolerine Oxidation. We are world scale with 5 plants here across the globe. This is unique. And of course, for this uniqueness, we see the prime businesses On the F and F, the industry clearly is our biggest customers combined with the Beverage industry that we also supply to. So this is going to be a strong business going forward and it fits very nice as a new business unit into our division, Consumer Protection. As far as the Polymer additives are concerned. This is a business branded with the name K Flex. It fits well to our Mezzamode products and like to take a look at the Pestisizers, pesticides, additives. So we have here substantial sales muscle and the parts Of Emeralds, the Teffs and industry exposure are going to be added to our polymer additives division and of course here under one The biggest sales muscle that exists in the industry, so leading to, of course, Most likely good top line synergies going forward. A glance on Page 7 shows you that we make our strides in the direction of further upgrading our Recognition and award list and rankings in as far as ESG is concerned, I know MSCI is very high on your radar. And here getting a double upgrade within 12 months speaks for itself. We are now in the We ranking, which I would say is a further NICE recognition next to the Platinum upgrades we got for by Equovadis. Also this is a rating that is known. I like like to take a quick update on guidance. Despite all the uncertainties that persist, geopolitical issue that still out there on the pandemic. We are looking positively into be on a good momentum. Basically, all of our industries are improving, like to take some not as quickly as others like aviation. I think this will still take time. But all in all, the businesses and industries are moving in the right Of course, some regions are going to stabilize. I think we had a very strong rebound in Asia already last in the second half and therefore growth definitely is going to be softer there. I assume that in Europe this will still be a good market environment growth wise also in the second half of this year, then Q4 most likely also with softer growth rates, but all in all business environment seems to be Now as far as LANXESS is concerned, in light of the organic development of the business, but also due to the inclusion of Emerald Calama Business, we upped Our guidance to EUR 1,000,000,000 to EUR 1,050,000,000. So this is what we see And the first question is from Christian Faitz, I have two questions maybe. First on logistics, can you please give us an idea by how much percentage points or basis points The higher logistic costs ate into your group margins and which segment was the most affected? And how do you see logistic costs evolving throughout the remainder This year, will you also push through higher pricing to compensate for the higher logistical costs? And then second Question, very simple one. How do you see working capital evolving for the remainder of this year? Thank you. Of course. Thank you for your question, Christian Faitz. So we will tackle them 1 by 1. And Mikael will take working capital, which obviously follows our past seasonality. I will take up logistics. On logistics, we've seen now in the second quarter a high single digit million incremental Impact, partly this could be absorbed, partly it is still outstanding. And we have to massage that into our pricing going forward. So that should clarify the impact here on financials. So it's definitely a drag. Not a huge one, but it's a visible one. 2nd, however, is the delay in shipments that we, for instance, faced From U. S. To Europe, U. S. To China, China definitely was a constraint. As you have seen in the press, it was completely stocked in some of the harbors, congestions everywhere. I've not Seen that so far as heavily as we currently see and that's impacting everybody, Not only us. And very clearly, I spoke to one of the CEOs of the big European like to turn the call over to the operator. That's a great question. Thank you. Thank you. Thank you. Thank you. And he clearly indicated to me, this is going to be a topic for the next 6 to 9 months because new capacities will only come Within 20222023, so for the remainder of the year, it will be a drag. Fortunately, I mean, We worked on this internally. Fortunately, our company has reserved close to 100% Our expected volumes, so we basically have capacities reserved. But even when you have capacity reserved, You sometimes face 1 to 2 months shipments delay. So that's basically the situation on logistics. And Michael will hammer out the answers on working capital. Come on, Michael. Hi, Christian, as well. Hi, everybody, from my side. Yes. Thanks for the question. And you're touching a point when looking in the cash flow statement, which obviously It's an eye catcher, but unfortunately to the negative, at least for the time being. As you all know, we do have this take a look at the typical seasonality throughout the year that in normal years, like in 2021, for example, we have the like to take a look at the increase in working capital in the 1st couple of quarters and then the stabilization in the 3rd and then the release of cash in the 4th quarter. And at this point in time, I do not see a reason why this usual pattern should be different this year. It was, of course, different last year. And this is the major deviation which you find in our cash flow statement. If you look last year, we were able in the second these numbers from the operating cash flow line, you will recognize that we had a rather good operating cash flow in the Q2. And in fact, it was the best operating cash flow pre working capital changes in the past 4 years. So the focus on our side is clearly as well on generating cash, but the pronounced development in the working capital in the second quarter was even, let's say, over pronounced because there were 3, 4, let's say, additional effects next to the obviously highly sharpening rising raw material prices, which did obviously have an effect On the inventories and on the receivables. Then on the receivables as well, we were in a position record for a very strong month of June, which in fact then leads to a relatively high number of receivables at the end of June. And the 3rd and 4th element, and that is the user seasonality, is the preparation for turnarounds, which we usually see in the second half of the year. And finally, Matthias was referring to it, some shortage of shipments, which did have as well a small impact on the volume. So cut the long story short, there should be the usual seasonality in place this year. Wow, that was a long answer. I hope that clarifies everything. So let's move on. Thank you, Matthias. Thank you, Michael. Most welcome. The next question is from Matthew Yates, Bank of America. Your line is now open. Hi, afternoon, Efrain. A couple of questions. The first, I think you've raised the guidance for your exceptional items this year by about €50,000,000 I guess some of that relates to The Emerald deal, but can you disaggregate the moving parts in that, particularly if it's anything relating to IT spend, for example, why your assumptions now are different The second question is around your lithium project. And I know there's still a lot of work here being done to evaluate and get all the answers before sanctioning. But I just had a question around the structure of the project. It potentially is a very sizable CapEx investment for the group. So I'm just wondering what sort of equity share you feel comfortable with In order to capture the long term potential profit opportunity here, but also manage the shorter term execution risk on what is Potentially quite a complex and unproven project. Thank you. Matthew, good to hear your voice. So Michael will address some exceptionals And I will pick up lithium. So on lithium, In light of the fact that standard lithium is now also listed at the NASDAQ Stock Exchange, of course, we have to be be very humble on making any statements relating to other companies. This is at least the legal advice. So I will share what can be legally shared. The structure on the joint venture, we've explained already in our Capital Markets According to the underlying understanding of both parties between 60% 70% And this is the working assumption as we speak. And of course, we would only inject Manny wants proof of concept from a full from our perspective is fully there in all aspects. And lastly, what I would like to say is, of course, we are advancing now more and more, not at the be of light yet, but we're advancing in the positive direction. And once we have new information that is like to share it, of course, with our investor base as well. And Michael, please explain and give transparency to exceptionals. Yes. Matthew, thanks for the question. In fact, there are 2 major driver, which you basically hit one off, that is like to see the Emerald Kalama effect, which we are expecting as we have now the signing already the closing already done last week. So we think we are able to already put some money into the system this year. And the second is Clearly, the M and A project on the one hand side or the project which came to an end in Q2 Like to see you in touch, the divestiture of the leather business. And then in the Q3, obviously, the closing of Kalama. And as we all know and recognize as markets are picking up globally when it comes to, let's say, operational markets, see as well clearly a pickup in the M and A market. And that is as well an aspect which is driving the like to take a look at the expectation on our side with regards to spending on exceptionals. Yes, we have been And 1, 2 further projects recently over the last few months that Did not materialize, but we are in further projects going forward. And perhaps one or the other Might materialize, but we are quite active in this regard. And therefore, we will take, of course, there's always legal charges, bankers You name it, because we go into DDs in a professional way, we really turn around every stone so that we don't buy Black cats in a dark basket, whatever the saying is. Thank you, guys. You're most welcome, Matthew. I hope we will see us soon in person. We are all vaccinated. The next question is from Chetan Udeshi, JPMorgan. Your line is now open. Mr. Ruedeshi, you can ask your question. Your line is now open. Yes, apologies. I was on mute. Just one question from my side, which is in Q2, did the price increases That you guys put through, did that offset entirely the inflation in raw deals and logistics and energy or did you have some catch up to be done on that regard in second half of this year? Chetan, good to hear your voice. The mute thing is something I always have on my side as well. But This time, I don't need to touch the button. So it has so far not happened. Your question is a very good one. And let me address it in the following way. Raws, by and large, we have In Q2, you can see that 10% pricing. In Q1, we had basically 0% price increase. So The 10% clearly show you that we have been extremely active. And by and large, I would say, we have nearly rolled all roll over. Some had catch up here and they're potentially still lagging, but majority wise, we addressed this. Energy is still out there. And my assumption is that I mean, energy is definitely more difficult, Because in many of our contracts, we have long term contracts where energy prices are not included because normally we don't take these swings. This from my point of view will be a not only this year activity, it will take us most likely 12 to 18 months to address Contract by contract, if you have big underlying contracts, it simply takes longer in the discussions. This is not done from one day or one But the positive statement to you is loss basically nearly all addressed. Energy, we are working on it. And therefore, I mean, let's see how we advance in this regard. I hope that clarifies your questions, Chetan. No, that's and if I follow-up, of course, you've given a full year guidance, which is useful. Can you help us understand how do you see Q3 at the moment? It seems at least in the past, we've seen a bit of seasonality That Q2 Q3 is slightly lower than Q2 and then bigger seasonality in Q4. At this point, would you say there is any reason to believe it will be different Then back in Q3 and Q4 just from a normal seasonality point of view? Well, I don't think that we will see a summer dip. I think overall, the world is still bringing things back in place in order. So We saw that Q3 last year markets rebounded. So the comparable basis volume wise at least are better than Q2, But we still see distortions in the system. We said as things are normalizing, We now provide guidance on full year and basically Don't really see the necessity to slice quarter on quarter into pieces. But by and large, we see Softer seasonality compared to the historic average. Of course, August always tend to be softer in some countries like Europe, Southern European countries, but we will not have I don't expect Anywhere a sharp summer break because the business and industries are on the rebound still. Very helpful. Thank you. We always like to be helpful. All the best to you. And next question please. The next question is from Andreas Heine. Yes, a Small number of straightforward questions, please. If I take these rubber chemicals out with, let's say, margin of 0, then I get in specialty additives To 18% in Couture, which is basically where you were in 2019. I think the ambition is 2020, and you outlined that the High margin Aerospace Lubes and Oil and Gas is not back. Is that coming back now next year? Is that Something which would be on the agenda to lift the Specialty Additives margin, including the business for AML Kamala To this target of 20%. That's the first question. The second, the current exclusion, could you clarify whether in any way LANXESS might be by this in your operations. And in the industrial and the advanced industrial intermediates, you produce also some products, which you have in Emerald Kamala. Will the marketing of those products be now done from the CP segment, so by led by Emeril Kamala or will that be still separate? These are my questions. Valid questions. I start with your first one. You're completely right. If you back out the numbers of the businesses that have been transferred into additives, I. E. The rubber additives, the business would be round about at 18% already despite aviation Still lingering and lowering diluting margins. So Overall, you see that the division additives rebounded nicely and it Should we bond further, at least this is our expectation next year. The second point to this is however, the rubber additives will never be a 20 Margin business, so this will clearly linger and dilute the underlying margin of this business. So this needs to be kept into perspective. Now to your third question, the K Flex products Margin wise, the lowest one in Emeralds. I don't think they will lead to an improvement in the margin. There would be where the margin currently rather is in the area of 15, 16 percentage points. So it will not be an incremental booster. The consumer products, they are the heavy hitters. The K Flex products are below the average of definitely below the average of consumer protection products. Now the marketing to your last business question, the marketing will all be in 1 business unit. So the F and S products that are currently embedded In the intermediates division and the sales reps and marketeers, they will all join The new business units, otherwise we create complexity. So we clearly make management carve outs, products, business carve out completely. So that here really a champion is being created in the F and F space. And it's a difference if you have 500 people, 500 pros on F and F compared to 1,000 pros on F and F with 5 assets world scale worldwide positioned, then in just one region Being positioned, so here we clearly make a step change in terms of specialty supplier to the F and F industry Globally, we see that all big accounts are with us. This is a unique setup and therefore it will be a unique strong like to take a look at the unified team led under one business structure and let's see how they are going to accelerate in the years like to come. So this is basically my feedback on the business. Then you've addressed Horrible accident that really has emotionally hit everybody here. And even though we are not directly impacted, You feel sorry. You feel condolences, which we expressed like to the entire Corenta family, on behalf of the Board, on behalf of the employees, our employees, I mean, these are so called brothers and sisters. I think that is what weighs heavily. Financially, There would be something like €5,000,000 to €10,000,000 operationally losses. This is embedded in our guidance. On everything that is higher than this, we have protection, financial protection through insurance, etcetera. But this is just a side point. The big point is the accident itself and the Shock to the environment and region. And now we need to work on it. Something like this simply may not occur, Full stop. Next question, please. The next question is from Peter Senghard with ZBARN. Your line is now open. Yes, good afternoon. Thank you for taking my questions. I have two questions left. 1st, in the view of the good volume demand this year, do you see a need for capacity expansions That you did not expect before. So maybe there is a segment or a division This is now possible earlier. And the second question is, do you expect an increase in administrative costs bonuses this year to do the elimination of COVID measures. Thanks. Very valid question, Hirsch Springer. Thank you. On capacities, I mean, the one thing that's Of course, we would like to flag our we are still in the process of working on battery chemistry. And so this is something where When we step in, we will step in and that will need CapEx. 2nd, for Emerald, we clearly already flagged that here We do see opportunities on debottlenecking the ultra purified benzoates. This is something that we will engage in because here the market is pretty tight. This is a like to take a look at the 2pper growth area in beverage industry and biocides, you name it. We are short of capacity. So This is something we will definitely take on board because of the juiciness of the business plans that I've seen so far. It needs To be double checked, now we own the business, but this was one of the fundamental drivers for our Business plan and the M and A analysis, so we look at this quite positively. Now on your second question, Definitely, I mean, this year we will pick up more SG and A costs and one big driver for that is A bonus. Last year, the management board, among others, cut the bonus to 50% Max, I hope and I would be happy that the entire managerial grades worldwide We'll get a bonus 100% or above if we excel. And therefore, that of course paying Bony is something that For the entire managerial grades worldwide is always double digits amount. If it's 50%, it's of course half of what you have when you have 100%. So therefore, this is something that will lead to an increase in the admin costs for sure. 2nd driver, but not as big as AP, as bonus is traveling. Our assumption is that Now, traveling will occur again in the second half, gradually increasing. At least we've communicated now since August After discussion, the management board that everybody who is double vaccinated is allowed to travel, who is not vaccinated has to stay Wherever he is in home office or in the office, but traveling is then not allowed, but vaccinated people can travel from now on As long as borders are open and of course travel costs therefore will also increase going forward. Thank you very much. Most welcome. Next question please. The next question is from JD Pandya on Field Research. Your line is now open. Thank you. I just want to basically look at the cash flow that is in LANXESS today. I'm sorry, but I'm going to compare it to the old days, Mrs. Akat, when you were the CFO and Rubber was in the company. The CapEx to sales those days was 7% and these days is also 7%. And then on top of that, you guys are spending, let's say about 1% to 2% on exceptionals for the last sort of couple of years. So in principle, When we think about $1,000,000,000 $1,100,000,000 EBITDA range, by the time we deduct CapEx and exceptionals, We're left with $300,000,000 $400,000,000 in the bank. So the question really is, what is the underlying CapEx Maintenance sort of CapEx level of LANXESS today. And are you spending a lot of money in projects which We haven't seen EBITDA for yet, where hopefully you will give us some longer term EBITDA guidance or earnings guidance on May 5 sorry, November 5, Which will allow us to sort of see the growth profile of LANXESS, because obviously right now, there is a very frustrating circle where despite All the recovery, cash in the bank at the end of the year is, if I may use the term disappointing. That's my first question. The second question really is around your bromine business. Your sort of Western peers have About 50% or so of longer term contracts. And so if you can just give us some color of what is the contract profile for LANXESS? And Our longer term prices adjusting every year and therefore the sharp rise in bromine prices that we've seen this year Should be reflected really in the P and L next year. Thanks a lot. Yes. Well, let me I'll just take note of your questions. Let me give you a High level answer on cash. And if this suffices, fine. Otherwise, you can come back to it and then Michael will pick up on the details. If I look at cash flow, if I look at operationally, of course, we saw Last year, the inflow through the implosion of prices, so we had a strong inflow on net working capital. And this year, we would see the opposite, which the entire industry is facing. So there's no change here. You will see also that our second half year cash flow is going to improve. So there is no change here. The two topics you have addressed was CapEx and exceptionals. Now on CapEx, there are Two elements that currently drag on CapEx and lead to the 6, 7 percentage points to sales that you have mentioned. The one relates to upgrade of plants. We bought and deliberately pointed out that the plants that we bought in the U. S. Need to catch up on investments in order to reach the standards we have. This will By and large, still be something for 2022 and will then move downwards. So this is one element on CapEx. 2nd element on CapEx, Which we also state is activation of software costs that we incur. We are running here big projects that would come to an end for the big countries next year that was adding to the CapEx envelope around about €40,000,000 €50,000,000 This is happening every 10 year when you upgrade SAP and like. So this is something that currently drags on CapEx, but automatically these two points will come down. 2nd then on exceptionals, I would clearly like to mention 2 points. We are in a heavy portfolio management Circle right now. You've seen projects you've seen in every year that we engage on big projects like rubber divestment in 2016, rubber divestment in 2018. These were big projects. On such projects alone for bankers fee, lawyers fee, environmental tax, You pay on average for 1,000,000,000 projects which are in the billions. I mean each rubber project was Leading to €1,200,000,000 €1,400,000,000 of cash on the account. You have something like €10,000,000 that you Spence, if you look into Corenta, I mean, you are in the double digit millions. If you look into Emerald, you're on double digit millions, etcetera, etcetera, etcetera. I think all of these M and A projects were taken positively by investors because either we got proceeds Like on leather chemicals, we got good cash and the commodity business went out. I think everybody liked that, But you need to pay for it. And the portfolio change process is not over. And therefore, we are doing the second. There are innovation projects that we have in exceptionals like I think people like COMMONDYS, but it incurs costs in low double digit millions. This is booked in exceptionals because Comandex somewhat is an exceptional project. One day we will open up if this continue to be on a successful path. We will open up. When we open up, investors hopefully will see proceeds. If we don't consider this as a viable project, we will stop it. And then we will no longer take €10,000,000 €15,000,000 like to take a look at the EUR 15,000,000 on a yearly basis. But then we will basically make sure that cash drain is reduced. But from all of What we see right now, we think this is a viable project. That should explain, I think the 2 questions on CapEx and exceptionals. As far as bromine contracts are concerned, the volatile markets definitely here is The Asian market, the Chinese market, China is on spot. As far as Europe and North America are concerned, you are normally on a contract basis, so most of the projects here have or products here, contracts here have a 1 to 2 year Duration and whenever prices in general move up, which they currently do, you see a positive pricing index 1, 2 years following the tightness of the markets. I think that answers both questions. Jai Thank you so much. Thank you. You're most welcome. Next question, please. The next question is from Mubasher Chaudhry, Citi. Your line is now open. Hi. Thank you for taking my questions. Just a couple left, please. The results didn't really have an impact from the auto chip shortage in the second quarter. Are you seeing some sort of restocking from your customers? And then should we expect more of an impact into 3rd and 4th quarter? And then coming back to the bromine comments, are you seeing increased increase from your side Given one of your U. S. Peers is having issues with their own growing commitments, so is that leading to More volume queries on your side or are you kind of fully fully committed and therefore we shouldn't expect a volume market? Thank you. Very good questions. Thank you, Mubasher. So let me address 1 by 1. Well, as far as Q2 is concerned, we did not see I mean, look into the Engineering Materials division, the pricing volume was Extremely strong. So we didn't see any impact on the ship, Difficult words, chip shortage, I hope I pronounced that correctly, on the chip shortage in Q2. I discussed with a big CEO in the automotive industry on this feedback pre like to take a look at Q2 earnings call. And the feedback I got there was and he gave an example for the industry. The industry could have gone up higher, but basically the industry went up in many of the regions around about 10%, 11%, 12 percentage points. This would have been 3 percentage points higher. But anyhow, 10%, 12% is Strong growth. Of course, on a modest basis, but in Q3 and for the full year, if they continue growing double digits, Then everybody would be happy, but their growth could be even more pronounced. The rebound in the automotive industry, However, is stronger than the decline or the shortage of the semiconductor industry. So We currently don't see that in our order book. We still see that the automotive industry tries to stock up, But they can't because we cannot produce as much as they want. We also see now that the polymers For the polyamides are kicking in for e mobility. We always said that e mobility It's or longs for more specialized Polyamides, which we have prepared. And therefore, we now see a strong pull From the electromobility industry for our products called porcane, this is a PBT product, But also for our polyamide. So as far as Q3 is concerned, we see a strong volume Coming from the automotive industry and not a reduction due to shortage of semiconductor chips. Now on bromine, second question. Yes, hey, I mean, We could sell more, but we I mean, our bromine wells, as you know, are In El Dorado, in Arkansas, and first of all, what you have to do is you have to have trucks to ship. Trucks are truckers, truck drivers are a rare specie In the United States, so you need to have more trackers. We find them, but Not enough. Once you found truckers, you need to get ship containers. Also this is a Rares, basically in the harbors. And therefore, anybody who has a shortage on chlorine whatever, We could sell more, but we need to find truckers and ships to export I hope this answers both questions. You're most welcome. The next question is from Geoff Hairey, UBS, your line is now open. Good afternoon. It's Geoff Haire from UBS. Just wondering if I could ask 2 quick questions. First of all, Would you be able to give us what the exceptional costs will be for Emerald, please? And then also, you mentioned in the statement that you had new long term What does that translate to in terms of numbers? Hi, Josh. I would take Saltigo and Mike will take your Emerald question. Basically, if you look at the we reported into the comments of our quarterlies Just in order to explain the price effect in CP and consumer protection, so this basically relates solely to Saltigo. In Saltigo, we have with some of the big customers agreements on contracts, Normally long term. 1 long term contract came to, let's say, an end and was renegotiated. And basically here, we made the agreements in this particular case that we take ownership Of the entire value chain for the managing of raw materials, etcetera, Normally what you have in these contracts often is the big customers provide certain like to introduce your first question. To you, would you further go and synthesize because we only make the high value Synthetic steps, this particular contract, the customer agreed to, We can also take care of the precursors, which we like to do because we saw opportunities here to improve the pricing. Bottom line, therefore, means prices for the product we adjusted. However, this margin wise is a positive for us and volume wise we get more volumes. So Bottom line, financially, this is clearly now turning into a long term contract, which is more accretive To the P and L than before, but you see a negative pricing effect, which we tried to explain so that nobody needs to bother, but that's behind it. I will not give now numerical details because This is Business Intelligence, but I think it explains the question in fully fledged to you and Mike will address Emeralds. Hi, Jeff. So for this year, we expect the exceptionals in the ballpark of roughly 15,000,000, €15,000,000 The same number holds true for upgrading the assets, like Matthias said, and the synergies should sum Up to around €5,000,000 that is for 2021. Then for the next 3 years, we expect to further exceptionals and CapEx and of course synergies and they will sum up to in total some CHF 25,000,000 on synergies, on exceptional CHF 35,000,000 on on CapEx CHF 55,000,000 And we provide a split over the next years in the slide deck in the backup. Thank you. You're welcome. And the next The next question is from Ratin Patel, Exane BNP. I just got 2 left. Firstly, on Emeralds. You've mentioned the 22% to 25% margin targets. Can you just give us some color on what profitability will look like this year? And any comments on organic growth In FNF would also be helpful. And then secondly, you mentioned, came on this earlier, just any update on how the monetization models are progressing and how your customer rollout has progressed as well in the last quarter would be helpful. Thanks. Well, Rekien, thanks for participating today and So the 22%, 25% is the, of course, the margin guidance. For this year, the incremental EBITDA stemming from Emerald World And based on our current understanding, I mean, we now need to do the technical stuff with converting From U. S. GAAP into IFRS, we've done that high level wise, but it needs to be, of course, made 100% Clear. Then we need to look into how they report cost wise, category wise and bring that into our Own accounting standards reporting guidelines. So these are rough numbers. Michael will give a more precise update on Emerald numbers like to turn the call back to the operator for the Q3. But on the basis of our knowledge today, the incremental EBITDA Stemming from Emerald for the remainder of the year is €35,000,000 And of course, Going forward, we are not going to report business unit numbers. We will always keep them on divisional level. I think this is standard in the industry. Now as far as monetization commodities is concerned, we are still out here and testing the difficulty that we currently have on platforms, Not only ours, but also other platforms. You've seen that last year in terms of pandemic platforms We saw around the globe that traffic on platforms just exploded because everybody went digital. Now the opposite is happening, not on the customer side so much, but on the supplier side, because As you know, as we report, as everybody reports in chemicals, products are short. And what people are doing right now is that Suppliers rather sell to their A and B customers. Platforms are basically another outlet, but as you are here, Rather trying to find outlets for your incremental volumes that you cannot get into other channels, You currently lack the supplier offering. And therefore, the platform currently, Commodus, There's not a reduction in buyers. Buyers are still extremely active on the platform, But the offering of the suppliers in the last 3 months has reduced by 30%, 40%, up to even 50 percentage We need to basically wait until the suppliers come back on the platform. The time will come. And then of course, we would see here that the matching to orders will go up again. But therefore, the monetization that we basically had on the that we brought into the platform, we now need to change gears and work on Bringing, 1st of all, suppliers back on the platform, which will take some time and then we will test the monetization again. So this is where we stand on Come on, I hope that clarifies everything. Thanks. You are welcome. Next question please. We have no further questions. So I would like to hand back for some closing remarks. Hey. So then hopefully we've answered all questions. Michael and myself, we would thank you for Your attention for your time and your interest. And we will, of course, we'll be on roadshow now in a digital or physical way. At least Oliver and Michael are now going physically on the roads. I would be digital wise on the roads and hopefully physically then in the months to come. I wish you all the best. Have a good summertime and stay healthy until the next call. Thank you from LANXESS and good on. Bye bye. Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.